The Farmer's Daughter USA

Hi, I'm Amanda! My family farms corn and soybeans in Southwest Michigan. I'm also a practicing attorney.

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Our Family Farm Just Became A Corporation – And Yours Should Too

February 18, 2014

I’m proud to say that after several years of gentle pushing, I finally convinced my parents to take the plunge and incorporate our farm. As of January 1, 2014 we are now an official business. (Actually, we’re a limited liability company (or “LLC”), but for all intents and purposes the distinction is irrelevant. The point is — our farm is now officially a business entity!)

Of course, our farm is also still owned and run by our family, which might cause some confusion. People try to throw the word “corporate” around as though it’s a bad thing. It sounds far removed from family operations and has a negative connotation of industrialized farming.

Despite complaints to the contrary, 96% of American farms are family owned and operated, according to the USDA. So, don’t be fooled — a “corporate” farm can still be, and usually is, a family farm.

Why would a family farm want to incorporate? Here are just a few of the reasons:

Operating as a business entity provides liability protection.

Operating a farm leaves a lot of potential for something to go wrong. Farming is a dangerous profession and not only can the farmers get hurt, but so can the unwary public. Just moving our equipment from one field to the next could potentially be harmful to other drivers on the road — imagine if that trailer overturned!

However, forming a corporation or some other type of limited liability company allows farm families a level of protection from those types of mishaps. Although the farm could still be sued, the injured person should be limited to only getting damages from the farm assets, not personal assets. That means that our farm families won’t be thrown out of our house if something terrible happens, while still compensating the injured person.

Businesses may allow for better tax treatment.

On one hand, forming a business entity could also result in double taxation — the company’s income is taxed and then each person being paid by the company has their income taxed.

Many times, however, forming a business entity for the farm means nothing changes. Our entity will be a “pass through” for tax purposes, which really just means the income is treated as personal income for each year. In some cases, there may be benefits to filing as a company, rather than just an individual. It obviously depends on the way the business is structured and a tax specialist can help with those issues.

Forming an entity can make estate planning easier.

Normally, a farm is just made up of a bunch of assets — equipment, tools, land, seed, buildings, etc. That can be a nightmare for families transitioning from one generation to the next. Valuing each item and figuring out how to distribute it fairly can be tough. Not to mention that there is the potential for the farm to be split up into itty bitty non-profitable pieces.

With a business entity, the estate planning can be simplified, especially with farm and non-farm heirs. Now, shares of the farm can be distributed, rather than actual assets from the farm. That means that a non-farm heir can still inherit something without the farm being divided up.

If you’re a farm family operating as a sole proprietorship, it is definitely in your best interest to consider forming a business entity. I strongly encourage you to find a lawyer that specializes in agriculture law and speak with them about this issue. My family took that step and so should you!

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Filed Under: Uncategorized Tagged With: corporations, education, family farms, legal, USDA

Comments

  1. Brigette Leach says

    February 18, 2014 at 2:27 pm

    Thanks for this! Totally agree that we should be changing from sole proprietorships to some form of corporation. We are in the process of protecting our personal assets AND facilitating estate planning with two LLC's. It just the way the world works that makes this necessary and you've provided a easy to understand explanation. Good job!

Hi, I'm Amanda. My family farms corn and soybeans in Southwest Michigan. I'm an attorney and I'm passionate about agriculture!

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thefarmersdaughterusa

I'm Amanda. My family farms corn and soybeans in Southwest Michigan. I'm an attorney by day, and "agvocate" at night.

Amanda Zaluckyj
Green soybeans as far as the eye can see. I took Green soybeans as far as the eye can see. 

I took this photo over the weekend. These beans should be turning yellow and drying for harvest. So why aren't they? Because...the spring drought.

Seeds need water to germinate. But after we planted we didn't have rain for weeks. So those seeds just sat in the dirt and never sprouted. Then, finally, it rained. And the tiny plants started popping up.

The problem? It was several weeks too late for planting. The question is whether they'll be ready to harvest before the snow flies. We have shorter seasons in Michigan, so it'll be close.
Sunsets on the #farm are the best. 😍 Sunsets on the #farm are the best. 😍
💜💜 💜💜
Don't let anyone make you feel bad about not purch Don't let anyone make you feel bad about not purchasing fresh fruits and vegetables. It all counts.

#modernagriculture #foodproduction #usfarmers #usagriculture #usfarms #food #knowyourfarmer #knowyourfood #modernag #farms #sustainableagriclture #sustainablefarming
I visited one of my favorite local farm stands ove I visited one of my favorite local farm stands over the weekend. I thought I'd buy a couple zucchini and cantaloupe. But the zucchini looked more like clubs, and the cantaloupe was too ripe for my taste. So I passed on those and bought some tomatoes that maybe cost more than I would have preferred.

But you know what I didn't do? I didn't complain about the zucchinis' size. I didn't fuss about the melons' ripeness. I didn't criticize the tomatoes' price. Instead, I smiled at the lovely lady and made small talk as I paid and went about my day. 

Why? Because I remember what it was like being out by the side of the road hot day after hot day. I know that we all poured everything we had into that produce. I remember how defeating it felt when some criticized it. I know that the price is probably around market value, even if it's cheaper in the grocery store. And I know that the farm family behind that cash register is giving everything they have to chase a dream.

I won't be the one to rain on their parade. 

#Respect
Happy #nationaldogday from Mischa! #nationaldogda Happy #nationaldogday from Mischa!

#nationaldogday🐶 
#pittiemix 
#blacklab 
#mischa
Mischa and I are home on the farm for the weekend. Mischa and I are home on the farm for the weekend. And we're loving it.
It isn't one or the other. Farmers care about all It isn't one or the other. Farmers care about all of it.

#agriculture #farming #sustainablefarming #sustainability
I threw a birthday party for Mischa! It was over t I threw a birthday party for Mischa! It was over the top and wonderful. And she had so much fun surrounded by people that love her. 💕

Thanks to everyone who came out to celebrate my little love. 💜
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